Correlation Between LAir Liquide and CLEAN ENERGY
Can any of the company-specific risk be diversified away by investing in both LAir Liquide and CLEAN ENERGY at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining LAir Liquide and CLEAN ENERGY into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LAir Liquide SA and CLEAN ENERGY FUELS, you can compare the effects of market volatilities on LAir Liquide and CLEAN ENERGY and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in LAir Liquide with a short position of CLEAN ENERGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of LAir Liquide and CLEAN ENERGY.
Diversification Opportunities for LAir Liquide and CLEAN ENERGY
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between LAir and CLEAN is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding LAir Liquide SA and CLEAN ENERGY FUELS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CLEAN ENERGY FUELS and LAir Liquide is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on LAir Liquide SA are associated (or correlated) with CLEAN ENERGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CLEAN ENERGY FUELS has no effect on the direction of LAir Liquide i.e., LAir Liquide and CLEAN ENERGY go up and down completely randomly.
Pair Corralation between LAir Liquide and CLEAN ENERGY
Assuming the 90 days trading horizon LAir Liquide is expected to generate 2.69 times less return on investment than CLEAN ENERGY. But when comparing it to its historical volatility, LAir Liquide SA is 3.43 times less risky than CLEAN ENERGY. It trades about 0.27 of its potential returns per unit of risk. CLEAN ENERGY FUELS is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 286.00 in CLEAN ENERGY FUELS on November 8, 2024 and sell it today you would earn a total of 51.00 from holding CLEAN ENERGY FUELS or generate 17.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LAir Liquide SA vs. CLEAN ENERGY FUELS
Performance |
| Timeline |
| LAir Liquide SA |
| CLEAN ENERGY FUELS |
LAir Liquide and CLEAN ENERGY Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LAir Liquide and CLEAN ENERGY
The main advantage of trading using opposite LAir Liquide and CLEAN ENERGY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LAir Liquide position performs unexpectedly, CLEAN ENERGY can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in CLEAN ENERGY will offset losses from the drop in CLEAN ENERGY's long position.| LAir Liquide vs. Suntory Beverage Food | LAir Liquide vs. BOSTON BEER A | LAir Liquide vs. JAPAN AIRLINES | LAir Liquide vs. China Resources Beer |
| CLEAN ENERGY vs. JAPAN AIRLINES | CLEAN ENERGY vs. United Airlines Holdings | CLEAN ENERGY vs. Nok Airlines PCL | CLEAN ENERGY vs. RCI Hospitality Holdings |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Global Correlations module to find global opportunities by holding instruments from different markets.
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